Investment and advisory firm Comercio Partners has issued a cautionary note regarding Nigeria’s rising GDP growth rate, suggesting that economic expansion might not improve the standard of living for many Nigerians.
The firm’s comments follow the National Bureau of Statistics (NBS) report, which indicated that Nigeria’s GDP grew by 3.19% in the second quarter of 2024, driven by increased crude oil output.
Comercio Partners raised concerns about the potential for ‘immiserization,’ where higher GDP growth does not translate into better living standards. The firm pointed to persistent high inflation, currently at over 33%, and a high-interest rate environment of 26.75% as factors that might negate the benefits of economic growth. According to Hanke’s Misery Index, Nigeria’s current score stands at 61.96%, reflecting the population’s severe economic pressures despite the reported growth.
The report notes, “Despite the recent growth, Nigeria’s economic expansion may be ‘immiserizing,’ where increased GDP does not translate into improved living standards. With an unemployment rate of 5%, inflation at 33.40%, and an interest rate environment of 26.75%, the potential benefits of this growth are undermined.”
It also highlights that while Q2 2024 showed growth, future expansion will depend on addressing sector-specific challenges and stabilizing key growth drivers.
Sector-Specific Concerns
The energy sector presents a mixed picture. Although oil production increased from Q2 2023 to Q2 2024, a decline from Q1 2024 raises concerns about potential future growth. Additionally, the firm expressed worry about the slowdown in non-oil sector growth, particularly in manufacturing and agriculture, which could indicate vulnerabilities.
To ensure sustained GDP growth, the services sector must maintain its momentum, and the industry sector must continue its recovery. Addressing declines in agriculture and manufacturing will be essential for achieving balanced and inclusive economic growth.
Backstory
According to the NBS, Nigeria’s economy expanded by 3.19% year-on-year in real terms during Q2 2024, surpassing the 2.51% growth recorded in the same quarter of 2023 and the 2.98% growth observed in Q1 2024. Despite this growth, macroeconomic challenges persist, including a weakened naira, which has reached N1600/$ on the official market, and the Central Bank of Nigeria’s interest rate hikes, which have increased the cost of capital for businesses.
